A company’s environmental, social and governance (ESG) credentials are increasingly driving high net worth investors’ decision-making, according to new research from Rathbone Investment Management.
The study found that 27 per cent base their investment decisions on a business’s impact on the environment.
It also discovered that 26 per cent would choose a company over another based on its good treatment of its employees. This is also something that is more highly valued among women compared to men (32 per cent vs 22 per cent).
Some 25 per cent of Scottish investors said that a company’s behaviour during the pandemic to its staff and customers/clients would also have an impact on their decision to invest or not.
Sustainability and action on climate change have also played a role in boosting the Scottish economy, according to many wealthy investors.
When asked what has had an impact on the Scottish economy, 42 per cent say the move away from oil and gas to sustainable alternatives has been significant. A further 38 per cent of investors said that the declaration of a climate emergency had a positive impact on the economy.
The nation will be at the centre of the climate conversation when Glasgow hosts the COP26 conference this autumn.
The research found that, ultimately, investors continue to be driven by performance when choosing an investment.
Just over a quarter (26 per cent) of those quizzed say that they would also choose a company to invest in over another if the business was local and based in Scotland. Personal recommendations from a family member or friend (26 per cent) also influence investors’ decisions.
Investment appetite is relatively high at the moment, the research discovered. When asked how they would describe how much risk they were willing to take, 75 per cent say they are happy to take on risk when investing.
Of this, 47 per cent say they are happy to take on a certain amount of risk and 28 per cent say they are happy to take on significant risk when investing.
About 19 per cent of investors say that they are moderately cautious when investing. A majority (68 per cent) noted that their risk appetite has increased in the last 12 months in light of recent economic events.
Simon Dewar, regional director at Rathbones, said: “Environmental and social concerns are high on the agenda for individuals, businesses and governments as we seek to ‘build back better’.
“Evidence also suggests that the pandemic has focused our minds on creating a healthier and more sustainable world, not to mention targets we’ve been set as a country to reach goals like net zero by 2045.
“Investors have a crucial role to play in reaching this goal, and it’s encouraging to find that ESG principles are being factored into their investment decisions. Through their investments, they have the ability to enact change by directing capital to companies that are working to have a positive impact on the environment.”